Is Etsy Inc (NASDAQ:ETSY) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Etsy Inc (NASDAQ:ETSY) was in 41 hedge funds' portfolios at the end of June. ETSY has seen an increase in enthusiasm from smart money recently. There were 39 hedge funds in our database with ETSY holdings at the end of the previous quarter. Our calculations also showed that ETSY isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the recent hedge fund action surrounding Etsy Inc (NASDAQ:ETSY).
Hedge fund activity in Etsy Inc (NASDAQ:ETSY)
At Q2's end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in ETSY a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Etsy Inc (NASDAQ:ETSY) was held by Renaissance Technologies, which reported holding $422.5 million worth of stock at the end of March. It was followed by D E Shaw with a $164 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Melvin Capital Management.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, created the most outsized position in Etsy Inc (NASDAQ:ETSY). Melvin Capital Management had $61.4 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $13.1 million position during the quarter. The other funds with brand new ETSY positions are Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital, Ted Kang's Kylin Management, and Charles Clough's Clough Capital Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Etsy Inc (NASDAQ:ETSY) but similarly valued. We will take a look at Guardant Health, Inc. (NASDAQ:GH), American Homes 4 Rent (NYSE:AMH), Galapagos NV (NASDAQ:GLPG), and Albemarle Corporation (NYSE:ALB). This group of stocks' market values are similar to ETSY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GH,19,225721,5 AMH,25,454005,6 GLPG,14,97279,-2 ALB,18,202553,-7 Average,19,244890,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $1228 million in ETSY's case. American Homes 4 Rent (NYSE:AMH) is the most popular stock in this table. On the other hand Galapagos NV (NASDAQ:GLPG) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Etsy Inc (NASDAQ:ETSY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ETSY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ETSY were disappointed as the stock returned -7.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.